Lack of Transparency by a Freight Company
July 6, 2016
Consumers must always know what they are paying for when billed for services they have sought. Hence, the service-provider must provide the customer a clear, transparent and itemized bill or invoice
Every now and then, frustrated consumers contact the Council regarding ambiguous or unclear bills/invoices given by some businesses which consumers cannot understand. The question at stake is why can’t the invoice or the bill have a breakdown of the charges? Why can’t there be a clear demarcation of the different charges imposed by a service provider together with any other fees/charges paid by them to the third party on behalf of the consumers? Is this a ploy to impose unfair fees and charges by the freight company?
We have one such case at hand which clearly raises these issues: importance of transparent billing system, customers’ right to question on what they are billed for and the illegal fees/charges imposed by service-providers.
The Council received a complaint from a customer against a freight company for failing to provide a clear breakdown of fees/charges, totalling up to $21,796.30 including VAT and duties.
After viewing the invoice, the client requested the freight company to substantiate the amount by way of receipts paid to third parties. The client kept requesting the company for explanation/justification regarding certain fees/charges stated on the invoice but it seemed the requests were either ignored or provided in piece meal basis to create confusion so that the client gives up.
Not getting clear answers, the client filed a complaint with the Council. We analyzed the documents knowing very well that a freight company will clear the goods by paying all fees and charges to be claimed from the client. We also knew that the freight company will have its own charges for providing this service in addition to the shipment costs.
We found receipts issued by third parties to be incomplete, unclear or not provided at all. Some invoices/receipts were undated or without shipment number. There was no clear demarcation between the State fees/charges and the fees charged by the freight company. Invoices had a number of other inconsistencies such as no date on the document, the date of the arrival, TIN number on the docket, account number and all other necessary breakdowns to justify the charges.
The Council also found that the freight company imposed additional mark-up on port charges, biosecurity fees and charges as well as other third party charges. For example, the freight company invoice showed $20 for Port Pass whereas the actual cost was $10 as reflected on the Fiji Port invoice. This created confusion. The freight company, however clarified saying the extra $10 is their ground handling fees in relation to Port Pass.
Another discrepancy found was related to the payment of the Value Added Tax (VAT). As per the receipts, the freight company paid VAT Inclusive Price (VIP) to other agencies. But when it came to billing the client, payments made as VIP were changed to VAT Exclusive Pric
(VEP), additional mark-up was added against standard government fees and charges. By doing this the freight company billed more in VAT.
The charges for customs clearance was also invoiced in a confusing manner as the freight company had failed to attach the details of the payment when it passed on the invoice to the client. For instance, Customs clearance charge was $18.40/hour – this cost was paid by the freight company, to be later claimed from the client. But in this case, the client was not furnished with all the necessary receipts/invoices which were issued by FRCA to the freight company. This left the client thinking what was he paying the money for.
The freight company also had the audacity to say that they were acting on behalf of the client, therefore, all payments were made by them, thus they sent an invoice to the client without accompanying receipts paid to FRCA, Ports Authority or Biosecurity Authority of Fiji. In such situations the client had a right to know and seek justification for each and every cost shown on the freight company’s Invoice that totalled to $21,796.30.
When the Council requested the freight company to send their list of standard fees and charges, the company replied that they have none and they add additional mark-up on government fees and charges.
This case is one of the many where consumers have fallen prey to some freight forward companies that impose additional mark-up on fees and charges on exporters and importers. Unscrupulous activities such as adding mark up on gazetted fees and charges is not correct.